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Tag: scholarship tax credit

In yesterday’s update regarding school choice lawsuits, I noted that a judge recently denied a request to fast-track one of the two anti-school-choice lawsuits (Citizens for Strong Schools v. Florida Board of Education). Today, a three-judge panel unanimously dismissed the other lawsuit (McCall v. Scott), in which the state teachers’ union alleged that Florida’s tax-credit scholarship program unconstitutionally supported a “parallel” system of public education and violated the state constitution’s historically anti-Catholic Blaine Amendment, which prohibits publicly funding religious schools. Last year, a trial court judge dismissed the case, holding that the plaintiffs lacked standing to bring the case because the scholarships were privately (not publicly) funded and that they were unable to prove that the scholarship program adversely impacted the district school system. The appellate judges unanimously agreed with the trial court, as Travis Pillow of RedefinED explains:

“[D]espite arguing that public funds have been diverted from the public school system, [the plaintiffs] make no argument whatsoever that public school funding has actually declined,” they wrote. Further, the court called the diversion theory “incorrect as a matter of law.”

The appellate judges held the case centered on political questions about school choice and education funding, and wrote that the ultimate “remedy is at the polls.”

“This is precisely the type of dispute into which the courts must decline to intervene under the separation of powers doctrine,” they wrote.

In a desperate attempt to halt New York legislators from enacting a new school choice law, teachers and their allies have resorted to misrepresenting what the proposed law would do.

Scholarship tax credit laws make donations to nonprofit scholarship organizations eligible for tax credits, rather than merely tax deductions. The scholarship organizations help low- and middle-income families afford tuition at the schools of their choice. The New York proposal, known as the Education Investment Tax Credit, would create a 75 percent tax credit, meaning that a $1,000 donation to a scholarship organization would reduce a donor’s tax liability by $750. Between the donation and the remaining $250 in tax liability, the donor would have given a total of $1,250.

New York teachers unions and the think tank they fund are trying to portray this arrangement as somehow financially benefiting the donors. Sadly, some media outlets have reported their spin verbatim, including WXXI News:

“It’s nothing more than a giveaway to the wealthy and corporations,” said Ron Deutsch, with the think tank Fiscal Policy Institute, which is in part funded by unions.

He says it’s also bad tax policy that could harm other charitable organizations. Under current laws, a million dollar charitable donation nets the donor just $22,000 in tax credits. He says education tax credit donors would get $750,000 back from a million dollar donation. Under a Senate version of the plan, donors would get $900,000 dollars back.

It takes real chutzpah to describe an arrangement that decreases the amount of money in the donor’s pocket as a “giveaway.” Deutsch falsely claims that the donors receive a “net” benefit, but the net is actual in the negative. The hypothetical donor that Deutsch describes could have paid only $1,000,000 in taxes, but instead chose to pay $250,000 in taxes and donate an additional $1,000,000. In other words, the donor would have saved $250,000 had she decided not to donate anything.

Some giveaway!

Scholarship tax credits expand educational opportunities for low-income families–the type that have been rallying in support of the proposal in recent weeks. Donors do not financially benefit from their donations whatsoever. Media outlets should not let themselves be used to spread misinformation to the contrary.

For those interested in learning how scholarship tax credit laws affect the lives of real families, watch the Cato Institute’s recent film, “Live Free and Learn”:

Earlier today, a New Hampshire district court upheld the “Live Free or Die” state’s nascent scholarship tax credit (STC) program, but limited the use of scholarships to non-religious private schools.

Earlier this year, the ACLU and Americans United for the Separation of Church and State filed a lawsuit claiming that New Hampshire’s school choice law was unconstitutional under the state’s Blaine Amendment, which prohibits the public funding of religious schools. The law grants tax credits to corporations in return for contributions to non-profit scholarship organizations that fund low-and-middle-income students attending the schools of their choice.

The decision hinged on whether or not tax credits constitute “public money.” Previously, the U.S. Supreme Court held that they do not, noting that when “taxpayers choose to contribute to [scholarship organizaions], they spend their own money, not money the State has collected from respondents or from other taxpayers.”

According to Black’s Law Dictionary, “public money” is “[r]evenue received from federal, state, and local governments from taxes, fees, fines, etc.” Black’s Law Dictionary 1005 (6th ed.1990). As respondents note, however, no money ever enters the state’s control as a result of this tax credit. Nothing is deposited in the state treasury or other accounts under the management or possession of governmental agencies or public officials. Thus, under any common understanding of the words, we are not here dealing with “public money.”

While neither the Arizona supreme court nor U.S. Supreme Court serve as binding precedent for how a New Hampshire court may interpret the New Hampshire state constitution, their reasoning should have carried great weight as the question before the court was the same. Nevertheless, the NH trial court rejected this traditional understanding of “public money” in favor of the plaintiff’s “all your money are belong to us” argument. In the words of the trial court judge:

This Court concludes that the program uses “public funds,” or “money raised by taxation” … Money that would otherwise be flowing to the government is diverted for the very specific purpose of providing scholarships to students.

This is precisely the understanding of “public money” that the U.S. Supreme Court rejected:

Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. Private bank accounts cannot be equated with the … State Treasury.

The U.S. Supreme Court held, in essence, that your money is your own whether or not it qualifies for a tax deduction of some kind. A taxpayer’s money only becomes “public money” once the government actually collects it in the form of taxes. The NH trial court judge, by contrast, holds that any taxpayer’s income on which the government might have a claim is instantly “public money,” even before collection, and it remains so even if the existence of a tax credit or deduction means that government will never collect it.

This ruling is particularly odd. The entire program is fine unless a parent by their own choice chooses a religious school. By this logic a program is illegal if neutral and only legal if actively hostile to religion.

The Institute for Justice, which intervened on behalf of the Network for Education, the state’s first scholarship organization, will be appealing the decision to the state supreme court. IJ Senior Attorney Richard D. Komer stated:

The court’s ruling inflicts again the blatant discrimination that motivated New Hampshire’s bigoted Blaine Amendment in the first place. We will immediately seek a stay of the court’s decision so that parents receiving scholarships can choose the educational options that best suit their child’s unique educational needs, regardless of whether that is a religious or secular school.

The trial court’s order halting the program is wrong on both the facts and the law. As a factual matter, the program is funded with private, not public dollars. As a legal matter, the federal Constitution prohibits states from preferring non-religious schools over religious schools, which is precisely what the court’s ruling does.

We can only hope that the Granite State’s supreme court will exercise better judgment.